CW&EP says reserves shrinking as new rules drive up costs

New environmental rules are driving up costs and rates haven’t kept up, so Carthage Water and Electric Plant is proposing a more-than-10-percent rate hike to take effect July 1.

Comment

By John Hacker

The Carthage Press

By John Hacker

Posted May. 3, 2012 at 12:01 AM
Updated Jul 24, 2012 at 7:40 PM

By John Hacker

Posted May. 3, 2012 at 12:01 AM
Updated Jul 24, 2012 at 7:40 PM

CARTHAGE, Mo.

Background

CW&EP’s presentation was part of a three-day series of presentations by city departments and agencies that receive money from the city budget through grants or contracts to the Carthage City Council Budget Ways and Means Committee. That committee must recommend the budget to the full council before it can be approved in meetings in June. The 2012-2013 budget takes affect on July 1.

New environmental rules are driving up costs and rates haven’t kept up, so Carthage Water and Electric Plant is proposing a more-than-10-percent rate hike to take effect July 1.

CW&EP Chief Executive officer Bob Williams and Chief Financial Officer Chuck Nuse told the Carthage City Council Budget Committee last week that its reserves were starting to shrink, endangering the utility’s ability to react quickly to any unexpected need for utility services.

“Without a rate increase if we eliminated all provisions for growth, build out and upgrades, we would be taking about $668,000 from our reserves again this year,” Williams said on Thursday, “a trend that we feel has to be stopped because we need to continue to have the reserves to do the infrastructure improvements and build out that we have to have.”

Williams said the utility’s board of directors approved what would be an increase of between 10 and 12 percent in electric, water and sewer bills for all customers, residential, commercial and industrial.

• The average residential customer, using 1,100 kilowatt-hours of electricity and 700 cubic feet each of water and wastewater would see his or her bill go up $15.11 per month from $134.30 to $149.41.

• The average commercial utility bill for electric, water and wastewater will go from $714.42 to $795.88, a jump of 81.46 a month or 11.4 percent.

• The average industrial bill will go from $29,210.96 to $32,324.04, a jump of $3,113.08 or 10.7 percent.

Williams said actual cost for each customer will vary by habits, size of home, how well a home is insulated and other factors.

“We came up with an average of somewhere between 1,000 and 1,500 kilowatt-hours for electrical customers.,” Williams said. “That varies though. For instance, my summer bill will be around 3,000 KWH because my wife cranks the air conditioner down, but we have a well-insulated house, so someone with a poorly insulated house may use more. But then in winter time it’s probably somewhere around 1,200 to 1,500 kilwatt-hours. It just varies a lot so all you can do is come up with an average. The little old lady in a small house may use 500 kilowatt-hours because she really conserves, is in a small house and on a fixed income, so many factors come to play.”

EPA rules

Williams blamed the increase in the cost of electricity on a number of factors, including the rising cost to transport coal to power plants, including the one in Sikeston where Carthage has gotten a significant portion of its electricity for years.

He said the cost of diesel fuel for trains means the cost of fuel to transport coal is 75 percent of the overall cost of the coal.

Williams said CW&EP also gets power from other plants, including a new one in Arkansas that meets all the new environmental regulations that are coming from Washington in the next two years.

However, meeting those regulations, increasing limits on the emissions of sulfur dioxide, mercury, nitrous oxide, and ash by 2014, will cost the Sikeston plant millions of dollars, a cost that must be born by all the utilities that buy electricity from that plant.

Williams said the final cost of meeting these regulations is still being determined.

:Sikeston has already identified $24 million in upgrade costs,” Williams said. “And they’re not finished yet because there are other things they’ll have to do. The overall result of the impending cost for upgrades, coal and rail is expected to raise our cost of energy by as much as 40 percent over the next three years unless there is some action to stop or slow down the EPA.”

Williams said the EPA’s enforcement of the federal Clean Air and Clean Water acts is having a far more drastic impact on energy costs than he believes Congress intended when it passed those acts.

He said Congress is working on legislation to require cost analysis on new regulations before they’re put into action, but he’s not optimistic that these new regulations can be slowed.

Williams said the costs of capital improvements and maintenance to the water and waste water systems were also increasing making it necessary to increase those rates.

Holding the line

He said it’s the first time since 2006 that CW&EP has raised electric and water rates.

Williams said a rate adjustment in 2009 only increased rates on industrial users and actually resulted in a credit on many residential bills.

“That was because the purchased power portion of the bill had risen as the cost of purchased power went up, and it’s our goal to reflect as accurate as we can, our cost in the base rate that we charge and to minimize the purchase power adjustment,” Williams said “In fact when we did that, we actually had negative purchase power adjustments, so they were a credit on the bill for a year after that, in fact I think it was in excess of a year. Where we had negative adjustments to the bill, which was a benefit to the customer.”